University Patent Policy for Effective Technology Transfer, 8: Transfer parameters

We are comparing two technology transfer scenarios as a way to get at effective university technology transfer policy. Here are the scenarios again:

Scenario 1:

University offers a non-exclusive patent license for $5,000 with no post-license assistance other than delivery of documents at the time of the license.

Scenario 2:

University offers a two-day research review workshop for $5,000 led by the team that made the invention. Up to three people may attend on each registration. Companies attending receive a royalty-free, non-exclusive license to the invention and for the next year, access to the research team for up to 10 hours of assistance on an as-available basis and notice of updates, plus a free license to any of those updates.

Transaction time

The first scenario, with a patent license offer, is a transaction that will go slow. It involves legal review, and legal review in turn depends on the status of the patent claims. If no claims are allowed, then the company does not need a license. If the allowed claims do not read on what the company intends to do (or is doing), then the company does not need a license. If the allowed claims are easy to design around, then the company does not need a license. The company will want to drag things out as long as possible to allow time to determine if the patent is valid, claims are meaningful, and a license is necessary. For that, the company will want to wait at least until there are claims allowed and see that those allowed claims read on what the company is doing or is considering doing and the company can’t do anything else.

By contrast, in the research review offer, there’s a natural deadline–the date of the workshop–and there’s no pressure to decide beforehand whether a patent license is necessary or worth it. The license comes with, and declining the license is easy. A potential assistance and collaboration relationship also comes with, and also may be declined. The review offer can start or develop a technical relationship that might lead to (i) students getting hired; (ii) a sponsored research agreement; (iii) membership in a department affiliate program or a research consortium; (iv) new ideas for the university to pursue with its technology, also available openly; (v) repeat business, as the company signs up the next year for another research review or wants to extend the 10 hours a year baseline technical assistance relationship.

Okay, money

In terms of money–since that is what people seem to equate with technology transfer (or at least with inventions and patents)–how do these two situations compare? In the first, there’s great potential. The Cohen-Boyer gene splicing patents went this route and earned $260M over the term of the patents, with non-exclusive licenses. But if the invention is not so earth-shaking as Cohen-Boyer, many companies may pass on the offer–maybe all would unless the university threatened to bind all access up with an exclusive license and then companies might pay to preclude such a thing. A bit of shakedown, really, and more reason to be bitter about university messing around with technology development. The big thing about this first approach, however, from the perspective of a patent licensing office, is that the money that does come in is licensing income–that means that it hits a patent license royalty-sharing schedule at the university and the licensing office likely gets a share, gets to pay off its patenting expenses, and there’s money to share with departments and inventors to bump up the status of the licensing operation within the university. “Work with us and we will make you more money this way.”

In the second situation, there’s also a potential for money, but on the face of it, the money that is available does not come as consideration for the patent license, though there’s a patent license in the mix and one could, outside the mix, request the license for no-charge. But the research review also asks a fundamentally different question–it’s not “how many companies will pay for a license after a legal review?” but rather “should our tech people go to this workshop and find out what’s going on at the university or should we keep our tech people in the dark about this stuff?” For answering this latter question, the invention does not have to all that transformative, with the potential to spring a new industry from bare ground. The invention does not even have to be the compelling thing–after all, it’s free. The invention, indeed, may be merely an excuse for people to get together to hear where a research team has been, where they are headed, how they do what they do, what a demonstration of the invention in action looks like, what their data and specs look like, and especially how do the techs from other companies react to it all and the like.

A research review meeting might attract 20 or more companies, especially if the research director is reasonably well known or ought to be. Let’s see, 20 companies at $5,000 is $100,000. Cost of the meeting is, say, $20,000. That leaves $80,000 to cover those 10 hours per year and notices of updates to the invention. If things works out, that looks like a net of $80,000 a year. Run things for five years, maybe ten. Net present value starts to look like upper six figures for the whole thing.

How many licensees is the offer of a patent license going to pick up–if one leads with the patent license? And can situation 1 approach get the same number of licensees as quickly as a research review, say, in three months, start to finish? I’d say no, not likely. The research review approach, on the face of it, is more effective at technology transfer, and can produce just as much money, if not more–since the research review builds in the prospect that companies might pay for continuing working relationships with a lab even if that lab doesn’t do any more inventing. Working with what the lab has already done and is maintaining for general access may be enough to keep the company paying its share of the support cost.

The patent license offer is stuck with resolving a veiled threat to suppress use or force payment for use with a one-time payment. There’s little prospect for repeat business. Surely the company does not show up and beg to be threatened again. “Hey, we like being threatened and paying small amounts to feel safe again–could you hit us again?” The research review offer creates the prospect for continuing collaborative work. There are lots of ways the relationships can scale–both in terms of the number of companies involved and the depth of relationship with each company. I know, this is basic one-to-one marketing–create a relationship with a customer and then work to extend and improve it. As long as the customer is discovering more of what it whats, and the university research team is discovering more of what it is able to do, this is a healthy symbiosis.

Anticipatory and follow-on relationships

There’s another aspect, then, that matters. In the research review, the relationships with companies set up an audience for future inventive work, not just in the one lab but in other labs at the university as well. The university has, say, 20 or even 50 companies working with a lab around a given area of technology for a year, producing net $80,000 to $200,000 or so per year. Now if another invention in the same area shows up, the university already has a working relationship with those 20 or even 50 companies. They know the lab personnel, they already have a license and assurance of future licenses, and they have already paid. They are beyond “qualified lead.” They are what is known in the biz, as a customer base, a channel that technology may move through.

And this reveals a crucial flaw in the patent offer approach. For effective technology transfer, the lab has to know the companies well before the lab invents anything. If something is invented, and it is up to a patent licensing operation to find companies that might be interested in paying for a license, it is already too late. The licensing office is three years out (the time for claims to be allowed), and in those three years much can happen to make the invention irrelevant. The premise that’s in many university licensing offices fantasy depictions of technology transfer is that the invention disclosure starts the process. So foolish, so bureaucratic. Creating the conditions for multiple companies to be involved early, before anything is invented, with a clear path to access that doesn’t involve their legal department is way, way, more effective technology transfer.

Scaling relationships, repeat business

Not only then do new inventions flow immediately to companies known to have an interest but also these inventions flow to the right people in those companies and move through relationships that have already been formalized. Any inventions made by any other university labs, in the same area of technology, can then be presented to the companies on the same initial terms–another $5,000 and a new cycle of research review meetings, and another lab to provide support. Call it lateral scaling in technology transfer. There just isn’t lateral scaling in “marketing” that leads with a patent license.

Once you are at this point, then, you can expect network dynamics to kick in. Companies that are already participating see that their participation continues to be rewarded. Other companies, not participating, join to see what the first-in companies are seeing. Yet other companies join because whatever is going on appears to be defining a platform for research or manufacturing or analytics or standard methods or functionality or performance testing–and they have to have access to whatever it all is. Paying is an obvious step to get invited to the action.

While there is scaling possible via the non-exclusive patent license–Cohen-Boyer at least shows it is possible–the inventions available for such a thing are rare, not common. And the Cohen-Boyer style scaling still involves an implicit legal threat tied to the patent rather than an offer to participate and gain access to services that are worth their price. Once a lab is using income from its company relationships to maintain technology or produce new technology, each company involved looks at what it is getting for $5,000 a year of contribution–$80,000, $200,000, more (we had projects of this sort earning $800,000 per year for multiple years going). The ROI for a $5,000 stake looks pretty darned good. By contrast, although paying for a patent license does enable activity that otherwise would be infringing and open to legal action, the $5,000 looks like an added cost–nothing to smile about in one’s dreams. “We paid because we had to” rather than “We were geniuses for paying because now we are getting platform stuff done at the university with input from scores of companies that otherwise we would have to be paying out 10x or 100x more to do, and even then we would be duplicating what every other company was doing, but in our idiosyncratic way that is expensive to maintain and to train for.”

There. Consider. The research review approach sets up effective university technology transfer. The approach scales, involves strong relationships, invites repeat business, generates money (because companies want to pay–they get what is going on). Where in “lead with the patent” practice does one see a discussion of transfer pathways, transfer relationships, peer-to-peer anything, repeat business, scaling, persistence over time, NIPIA? None of that shows up, in part because none of it ever happens. Leading with a patent right suppresses all these sorts of natural transfer considerations.

Similarly, university patent policies make a great flourish in their preambles to the importance of technology transfer. And then they ignore transfer nearly altogether and settle into working out how to claim institutional ownership of most everything, how to free the licensing office from accountability and complaints for its management of patents, and how any licensing revenue will be shared out between inventors and the university administration. Ownership, patent licensing, money, dispute management. That’s the present university patent policy conception of effective technology transfer. It’s about as far as one could get.

When the Romans moved out of Britain, the Anglo-Saxons moved in. The Anglo-Saxons couldn’t work the Roman fireplaces and so instead punched holes in the roofs of Roman villas and lit their fires on the mosaic tile floors. That’s pretty much what has happened with university patent policies–just ruins of their former policy selves, spruced up to look proper, somewhere between sad and laughable.





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